How Will Biden Differ From Trump on Trade and China Policy?

Mish

Trade was not a key subject in the debates. So what do we expect of Biden?

Biden's Agenda

The Steptoe & Johnson law firm issued a Client Advisory on US Trade Agenda in the Biden Administration.

  1. Free Trade Agreements. One of the few specific statements on trade policy that then-candidate Biden made during the campaign is that he does not intend to pursue free trade agreements (FTAs) until significant domestic investments have been made in the areas of healthcare, infrastructure, and education, among others. 
  2. Trade Promotion Authority: Trade promotion authority (TPA), is currently set to expire on July 1, 2021. TPA, also known as “fast track” authority, restricts Congress’s ability to amend covered trade agreements by requiring an up-or-down vote, assuming that the President follows a prescribed set of formalities during the negotiation process. Congressional Democrats will press for greater recognition of social and environmental issues in the context of FTA negotiations, with an emphasis on achieving climate change goals and obtaining stronger worker protections.
  3. Trade Impacts of Domestic Investment/Reshoring: On the issue of domestic investment, the Biden Administration seems likely to prioritize the reshoring of US manufacturing, Buy American programs, and policies to strengthen US supply chains in areas that are critical to US competitiveness.
  4. The US-China Relationship: Over the past two and a half years, the Trump Administration unleashed a variety of new measures aimed at reshaping trade between the United States and China, most notably, the imposition of tariffs on nearly $370 billion in Chinese imports as a result of a Section 301 investigation into China’s intellectual property and investment practices. While President Elect Biden has not yet signaled what he intends to do with these tariffs, it is unlikely that the Biden Administration will simply remove them outright without seeking some kind of concession (trade-related or otherwise) from China in return. President Elect Biden will also inherit a number of other China policy challenges with trade and supply chain implications, including US concerns about state-supported competitors in the high-tech sector and imports produced with forced labor in Xinjiang. On these and other related areas, the Biden Administration will likely face bipartisan pressure from Congress to take decisive action. 
  5. Bilateral Trade Relationships: While the substance of the Biden Administration’s stance toward China may not change significantly, its strategy is expected to differ. Whereas the Trump Administration adopted a series of unilateral actions against China, President Elect Biden will likely adopt a multilateral approach to addressing trade issues. This is in part a reflection of the President Elect’s more globalist approach, developed from his leadership of the Senate Foreign Relations Committee and his foreign affairs portfolio in the Obama Administration. This means that any further US negotiation with China on a “Phase Two” agreement addressing more systemic issues of concern to the United States will likely be shelved in favor of a multilateral approach.
  6. WTO Reform: The Biden Administration will also need to consider multilateral action with respect to the World Trade Organization (WTO). At least in the near term, it is unlikely that the Biden Administration will adopt a significantly different approach from that of the Trump Administration. 

What Changed?

1: Free Trade Deals: Biden will not be in a rush for new deals. Trump wanted deals but was so confrontational he delivered nothing. No Change

2: Trade Promotion Authority: Trump did use Trade Promotion Authority to replace NAFTA with USMCA, but that switch accomplished nothing. Effectively No Change 

3: Domestic Reshoring: Biden will promote made in USA. So did Trump. Manufacturing did not flood back under Trump and won't under Biden either. No Change

4: China: Trump sought concessions from China and never got them. Biden will attempt to do better. But if he is hamstrung by climate change demands and worker rights issues he is unlikely to get very far. And in the absence of Trade Promotion Authority Biden will have a tough time threading a needle between demands of the Greens and demands of the Republicans. Change Remains to be Seen

5: Bilateral Trade Relationships: Biden will drop one-on-one confrontations with a multilateral approach. To the extent he needs cooperation from the EU, well that bickering could last years.  Change in Style, Substance Remains to be Seen

6: WTO Reform: Steptoe says it is unlikely that the Biden Administration will adopt a significantly different approach from that of the Trump Administration. 

I disagree. Trump paralyzed the WTO  by blocking appointments to the seven-person panel for more than two years.

Bloomberg notes the WTO has been unable to issue judgments on new cases since December 2019 because there aren’t enough active members. Trump’s complaint is that the WTO evolved into a legal tool for nations to exert pressure on the U.S., and his top trade official called it a “litigation-centered organization.”

China desperately needs to stay in the WTO system. 

Trump made it easy for China because no one wanted to go along with Trump's self-serving demands. Then rulings stopped altogether.

Biden will make appointments and seek cooperation.  That's different.

If the US can get the multinational cooperation it needs, it may be able to force China to make changes. That is a big if, but it is more likely to succeed than Trump's ever-escalating tariff policy that backfired.

Perhaps after dealing with 4-years of Trump's threats and bullying, we will see better cooperation from allies. 

If not, at least the threat of ever-escalating trade wars under Trump will be over.

Dysfunctional WTO

It's important to note that the WTO was largely dysfunctional before Trump. He turned largely dysfunctional into totally dysfunctional by not appointing representatives leaving the WTO unable to investigate new trade claims.

Why was the WTO largely dysfunctional?

Two words: The EU 

For decades the annual WTO trade talks broke down over agricultural policy. The EU was unwilling to bend on its protections. In return, third world economies would not bend on manufacturing and intellectual property issues.

Why wouldn't the EU bend? 

One word: France. 

France will not bend and perhaps never will on agricultural protections. The EU is largely dysfunctional because of this.

US Role in the Mess

Trump wanted a comprehensive agreement with the EU that included agricultural policy. That was the end of it. 

The irony in all of this is that next to France, the US is the most protectionist country on agricultural policy. 

Look no further than the sugar lobby and ethanol policy. It makes no economic sense to produce ethanol from corn. It makes no sense to drive US candy manufacturers out of the US over sky high sugar prices. 

But here we are. 

Every year in the failed WTO meetings the US says it will bend on agricultural tariffs if the EU does. This is a cop-out. 

Correct Trade Policy

The best practice would be to eliminate tariffs and slash corporate taxes no matter what any other country does.

Capital and jobs would flood in. 

Nonetheless, any step back from escalating trade wars and perpetual bullying is a change for the better even if far from ideal.

Will Biden Be Better Than Trump?

Yes, for the simple reason Trump is one of the worst presidents on trade policy since Smoot-Hawley and the Great Depression.

Biden is likely to quickly work out an agreement with the EU over the Boeing-Airbus dispute. But that is a return to the status quo where both the US and EU offer the airplane manufacturers illegal subsidies. 

Biden will be better in the sense that it is better to have a broken arm than two broken legs. 

If you prefer a car analogy, Trump put global trade in reverse. Biden will return the car to park with a chance at low gear.

Biden is far more likely to make further gains in trade policy in the same way that 20% is far better than 0%. Don't expect fast gains but welcome them if they occur.

Trump's Failure

Trump tried to balance the trade deficit with tariffs. It was a fool's mission as explained in Balance of Trade vs Gold Window

Also consider Trump's Unwinnable Trade War: Gold Explains Why

Mish

Comments (62)
No. 1-22
drsxr
drsxr

Mish - Biden has already stated in a Foreign Affairs essay that he intends to return to the Trans-Pacific Partnership. It will take a few months to start this process again. Agree with the multilateral approach.

njbr
njbr

The real problem for the counter-party to any agreement--trade or otherwise--is that they now know that any agreement reached by one administration may last only for the remaining duration of one 4 year term.

Sechel
Sechel

A bilateral trade agreement between the U.S. and the U.K. is dead now. Biden has been clear he values the Good Friday accords and has warned Johnson on this front. While Biden will respect and value the strategic defense treaty between the U.S. and the U.K. Biden will be looking more to the Continent on trade.

Biden is already signallling that he will stick wiht our Asian allies more for defense. He's already signaled the U.S. Japan defense treaty includes the Senkaku islands. Trump's been America alone. Biden will be more traditional valuing relatinships and alliances.

As far as China and Asia trade. Both progressives and Trump have been against free trade. I suspect Biden will walk from Trump's carousel tariffs and not engage in a tariff war I doubt we'll see a quick unwinding of Trump's tariffs either. At the very least Biden will de-escalate with China. I further suspect he'll be tougher when it comes to the military than on trade which is fine with me. The only legitimate issue in my view is the theft of intellectual property.

TPP still won't happen. That's dead.

I agree on reshoring being a priority but I think this is a waste. It won't happen for reasons having nothing to do with who is President. The way to make America competitve is to make America a better and more productive place to locate a business. Taxes are really only a small part. An educated work force and good infrastructure can matter just as much if not more. For some industries the U.S. lacks the infrastructure to support the industry at present.

amigator
amigator

He will do what is good for the big banks, period. He will say he is helping USA and the media will even report that, but his actions will support Wall Street and the Banks.

1972 Elected Senate 13733 banks in the USA
2015 When he left office 5340 banks.

He was part of the system that concentrated monies into fewer hands. I think that is an issue we are struggling with now. But I could be wrong.

silverdog148
silverdog148

We all like to come down on Trump for being a narcissist and and absolute joke due to his personal antics, however we miss the fact that while misguided and frankly probably due to ego issues, he actually tried to do something on China, the Chinese tried to play him with that state visit early on but it didn't work, Trump still kept pushing them.

There is no current viable military solution to China that doesn't involve large casualties on both sides, so all this business about Biden being tough militarily on China is bullshit and they know it, yeah we can parade around the South China Sea all we want but to actually get real results would require much much more than that. No one wants to go there so it's off the table, any of these proposed "solutions" are bullshit.

The real area where the U.S can have an impact is on trade but this would affect the fat cats in the U.S such as Warren Buffet/Wall Street/Etc. Trump got played on trade by the Chinese via their promises to buy ag products in the billions to help his re-election, but trade/economics is the only real lever the U.S has over the Chinese at the moment. The have played the last two presidents like a fiddle Trump/Obama and there is no reason to expect they won't play Biden.

Intelligentyetdiot
Intelligentyetdiot

Tired of seeing raw wool go from England to feed the clothing industry of Flanders, Edward (1331 f.) lured Flemish weavers to Britain, and through their instruction established a textile industry there. Then he forbade the export of wool and the import of most foreign cloth. By the end of the fourteenth century the manufacture of clothing had replaced the trade in wool as the main source of England’s liquid wealth and had reached a semi-capitalistic stage.

Doug78
Doug78

For the moment it is just words and Biden uttered almost no words on anything to do with the economy except his usual platitudes during the campaign. Look at what his big donors want and those will be his policies. The banks gave a lot. What do they want? Tech gave a lot too. What do they want? Big business gave a lot. What do they want? These three groups are not in opposition to each other. Their interests converge so they will get what they want. My guess is Free Trade for one. No anti-trust or anti-competition investigations with teeth for another and for the banks continued expansion of their powers. Basically we go back to the Bush and Obama years. After all they didn't do all this to change the way things are but to go back to what they once were.

Casual_Observer
Casual_Observer

Slashing corporate taxes doesnt do much except drive up the wealth of the billionaires and create more wealth disparity via the stock market. The real problem the US has is the currency is still the best house in an average neighborhood. Nothing can fundamentally change on trade because of the US consumer. The world is still competing for our demand.

Rippletum
Rippletum

Democrats strategy for next 2 years in face of Republican senate blocking of agenda should be as follows:

  1. Refuse to do anything on the economy and taxes unless Republicans agree to reforms that the Democrats and Republicans are willing to do that will truly impact the deficit spending either with spending cuts or tax increases. Otherwise do everything to pin coming economic collapse on the Republicans as they have set in motion the tax cuts and inequality problems since they have run everything for the last 10 years, 4 years with Trump and they did not allow Obama to do anything on major tax policy for the last 6 years of his administration.
  2. Require that legislation be passed to limit presidential powers including ability to pardon self, make emoluments clause have significant cash and criminal penalties, impose substantial cash and criminal penalties for using government facilities, etc. for reelection efforts and if Republicans fail to pass new limits, Biden and his entire cabinet should do the same things Trump did and flaunt these rules until Republicans give in and pass limits.
Eddie_T
Eddie_T

As global consumer demand falls due to the demographics of aging in many countries, the US will be less affected by that than most, because we are not an economy that is dependent of exports....the way China is...or Germany is.

In the EU, France has the best consumer demographics for the next several years, from what I understand.

njbr
njbr

Look at the real GDP chart...

1950 to 1980--all those years at virtually the same rate of growth (30 years)
1980 to 2010--all of those years at a higher (but constant) growth (30 years)
2010 to 2020--all of those years at a lower(but constant) growth(10 years)
2020 to ???--??

Now tell me again how much an individual President influences the economy

The big trend change in 1980 was the acceleration of the economy due to trade, automation, financialization, computerization.

The big trend change in 2010 was the recognition that the changes begun in 1980 could not continue to spin wealth out of nothing for the common folk.

Is 2020 a similar change, or just a deeper recognition that money cannot be spun out of nothing for the common folk and fewer and fewer components of the economy are viable?

Carl_R
Carl_R

It just goes to show that there is not a lot of difference between the Republicrats and the Demopublicans. The more things change, the more they stay the same. Yet, Trump was sort of dysfunctional, so I expect Biden to do more or less the same thing, but somewhat more efficiently.

The only thing that will really change American trade policy is when the USD loses its status as the global reserve currency, and when that happens, everything will change. When will it happen? Its hard to know. Probably not in the next few years, but almost certainly in the next 20-30 years. The US has a great deal, where we can have a high standard of living by trading bits in a computer for consumer goods, and while we can enjoy a world where government deficits and trade deficits don't matter, but it won't last forever.

KidHorn
KidHorn

What Biden said or thinks doesn't matter. He lacks the capacity to formulate a plan on his own. The decisions will be made by the cabinet and VP. The cabinet hasn't been appointed yet, so it's difficult to predict what they'll want.

Doug78
Doug78

Funny thing. Those who comment here are from all political sides and yet no one expects much out of Biden. The consensus seems to tend toward resignation rather than elation or despondency which is the normal reaction after an election.

Johnson1
Johnson1

China ran circles around Obama. I expect the same. China is out to be a dominate the technology industries by all means necessary. Biden has already loss. He will not be tough. He is about unity. The U.S. will lose as we do not have a long term plan. China bends the rules and Biden will not enforce them as Obama did not enforce them. Face it. Biden does not know business.

Mish
Mish

Editor

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Augustthegreat
Augustthegreat

Biden may do nothing and has 0 contribution to the country, but that is still better than what tRump has done which is big but Negative. My toddler told me that 0 is bigger than a big negative number.

Realist
Realist

If Biden does nothing at all on trade, that is an improvement. At least it will stop the backward slide under Trump.

If he accomplishes anything, such as rejoining TPP, that is a big step in the right direction, as it would lower trade barriers that many US businesses currently suffer with the participating countries. In addition, TPP was created to present a multi-country response to China, which is likely to be far more effective than Trump’s go-it-alone approach. There is strength in numbers.

Finally, whatever trade agreements Biden accomplishes are likely to provide a stable environment for business. Business craves stability and hates uncertainty. Trump was the ultimate in uncertainty, often changing his mind with each tweet. It made it impossible for business to plan. Biden should provide some needed stability that allows business to plan and commit.

Webej
Webej

Keypoint: ‘‘The irony in all of this is that next to France, the US is the most protectionist country on agricultural policy.’’

No trading block is apt to abolish farming subsidies. Many in the EU don't support the farm subsidies, but Europeans are adamantly against GMO and hormone/antibiotics based agricultural products. Eastern Europe has seen their ag sector devastated instead of flourishing from cheap exports. Don't see Canada or Japan changing much either: massive political defeat awaits parties that do.

Eddie_T
Eddie_T

US is protectionist on cotton too. In 2104, we paid $300 million to Brazil because they got a ruling against us with the WTO......and my understanding is that something like that could happen again.

drsxr
drsxr

comments above under my and @Sechel 's posts.

eurolord
eurolord

So what do we expect of Biden? I guess you haven't heard that Biden?Kamala will finally once and for all put an end to "Systemic Racism.


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